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Premises raided as former bank officials are investigated

Wed, Aug 13, 2008, 01:00

POLICE AND prosecutors raided premises in Germany and Ireland yesterday as part of an investigation into suspected criminal behaviour by five former board members at SachsenLB.

The five are suspected of improper accounting and breach of trust at the public-sector Landesbank that became one of the earliest victims of the credit crisis 12 months ago.

SachsenLB ran off-balance sheet conduits in Dublin that were unable to refinance after liquidity dried up last summer.

The bank had to be handed a €17 billion credit line as part of a rescue package organised by other German banks and regulators, and the firm was later sold to Landesbank Baden-Württemberg, its biggest state-owned counterpart.

Four board members including Herbert Süss, chief executive, left the bank in the days after its near collapse.

German authorities did not name those linked to the inquiry, but said the current board was co-operating.

The raids, carried out at 28 locations, appear to step up the pace of an investigation that German authorities said began last October.

They took place at the offices and the homes of those under investigation and included searches by gardaí in Dublin.

Documents, computers and electronic equipment were taken during the searches.

A spokesman for the Garda confirmed that it had been asked by the German authorities to carry out a number of raids on offices in Dublin city centre as part of a fraud operation in Germany.

He said that the Garda had undertaken searches of the offices "under warrant" through "mutual assistance procedures" between the Irish and German police forces.

"German authorities have been advised of the result of these searches and are aware of any material that may have evidential value," said the Garda spokesman.

German officials said they were investigating whether the executives had "placed the existence of the bank at risk" by increasing its financial exposure without due regard to its capital strength.

The investigation is also examining the disclosure made of the bank's exposure in its accounts and risk-management reports.

SachsenLB was Germany's newest Landesbank, which was set up after the country's reunification to try to stimulate economic growth in its home region of Saxony, part of the former east Germany.

Several other German Landesbanken, including WestLB and BayernLB, have also had severe financial difficulties stemming from their exposure to investments that came unstuck as a result of the credit crisis.

IKB, a corporate lender with a large public-sector shareholding, was also badly exposed by the crisis and is being sold by its majority owner. - (Financial Times service)